Thursday, May 10, 2012

GW Roundtable on IP Small Claims

David Kappos, USPTO: small claims has come up before.Small rights holders constantly say that
federal litigation is incredibly costly, discovery is monumental, the whole
process is way too expensive and unaffordable to the most vulnerable
participants: small rights holders are priced out of the market.Inventors should not be distracted by
litigation.Same is true with copyright:
many creators can’t afford to defend the fruits of their creations.Any small claims procedure has to be guided
by basic constitutional principles.The
time is now to protect creators/provide a model for other countries.

Maria Pallante, US Copyright Office: right now in middle of
study, due Oct. 2013 to Congress; may or may not have recommendations for
statutory change.Agreement that we
should make copyright work more smoothly; independent creators are primary
focus for our office: small rightsholders, small presses, contributing
diversity of views and ensuring they have exclusive rights.

Paul Storer, UK IP Office

Mostly been working on reforming patent court.Part of larger access to justice
project.1989 court wasn’t successful
because overtaken by general changes in civil litigation.Differentiate lower court from higher court. Streamlined procedures for patents: statement
of case—clear judicial guidance on what the judge expects from a case
presentation.Focuses legal
representatives’ pretrial effort and time on how to bring the case.Time scales also for statement of claim, defense,
counterclaim. Clear case management rules which empower the judge to handle the
case at conference on the basis of what’s been filed.Court will make an order in relation only to
specific and identified issues.May
order disclosure, experiments, witness statements, expert reports, cross
examination, and other if it seems
likely to be more helpful than costly.Guidelines on trial length: generally 2 days.(Was named as the patent county court, but
always misnamed—industrial design, now including other things like performers’
rights/related rights.) Fixed scale of costs, £50,000 (that would be a patent
case with validity in question; judge wouldn’t expect nearly as much for a
copyright or design claim).Focuses on
representatives’ minds that there’s a maximum for going forward.Our patent attorneys have rights of audience
within the court so they don’t have to instruct legal counsel, making it
cheaper.

Most interesting reform: limit on damages within the court,
£500,000.To ensure that the court heard
cases appropriate for streamlined procedures. Ensured no preaction disputes on
appropriate forum.May seem low; over
75% of respondents to our call for evidence agreed that was the right amount,
but the figure is under review. Reforms in the works that will keep high-tech
cases from being forced into high court.

3 tracks in civil litigation: small claims (under £5000),
fast track (under £25,000), and multitrack, all defined by limits on
damages.All IP allocated to multitrack
where costs aren’t as constrained.Our
proposal was to adapt general small claims for IP.Allocation will be according to value, but
ministry of justice decided to double general small claims amount to £10,000
and therefore so will we.If defendant
contests, judge will be final arbiter.Hearings are informal; evidence is not necessarily taken under oath;
experts are only permitted at judge’s discretion; legal representation isn’t
necessary; cost recovery is minimal--£90 for lost earnings, he thinks £260 for
legal costs. Most claims will be heard on paper and will be mediated; most will
not reach hearings.

IP-specific: interim injunctions permitted under general
small claims, but we’ve chosen not to allow them for IP. They’re available
under streamlined procedures at comparable cost and the procedures allow a bit
more scrutiny.Streamlined procedures
are already available, but not many applications in the past year.

Online infringement: same as physical infringement, and same
litigation rules should apply.Title/infringement still need to be proven.

Scope: unregistered design right/trademarks/performers’
rights/plant breeders’ rights/etc.Patents and registered designs are outside the small claims scope, but
still can get streamlined procedures.

Q: what happens if a party is dissatisfied with the choice
of an IP specific tribunal?Is there
removal/review?

A: As the result of the call for evidence, we found that
many claims, such as for nonpayment of royalty, have been brought in general
courts, even though they shouldn’t have been.All IP claims are governed by the IP rules and should be in the Patent
County Court.

Q: Costs are capped—what does that mean?

A: recoverable costs from the losing side.Can still pay your lawyers more, but if it
will cost you £100,000 you may want to shop around.Filing fees are on a sliding scale dependent
on value—no different from general track; minimal/negligible for the smallest
claims under £500.

Q: mediation: is it mandatory?

A: No, but in April 2013, all claims in small claims track,
under £10,000, will automatically be referred to mediation.But there is no compulsion to mediate.Some respondents said they wanted specialist
IP mediators, but Ministry of Justice agreed that, at such a low level, the
importance is facilitation of mediation rather than specialization; though we
do have some specialists.

Court can still have jurisdiction over larger claim if both
parties agree, or if the claimant agrees to limit size of claim to
£500,000.High court also has
streamlined procedures allowing case to be heard on paper alone if both parties
agree.No scale of costs (limit on cost
recovery) in a high court proceeding.Under statute, judge can determine whether something should be heard in
high court, taking into account the parties’ financial positions.There are rules governing transfer if, for
example, damages turn out to be £600,000; judge may have ability to cap costs.

Pam Samuelson: what kind of review is available?Do they just render a judgment or also issue
an opinion?

A: Decision is appealable to the circuit judge.Judge has the right to decide whether or not
to issue an opinion.

Bob Brauneis, GWU Law: Constitutional issues in small claims
exist: jury rights?Collateral
estoppel?Wouldn’t make sense if the
small claims court could only issue injunctions.How do we set up a procedure preserving
sufficient access to a jury to satisfy the Seventh Amendment and also ensure
that many disputes will be resolved without juries: provide defendants incentives
not to choose a jury trial.

Richard Pierce, GWU Law

Article III: it’s fine to take a class of disputes
previously disputed by Art. III courts and reassign to agency, as long as
they’re subject to plenary review by a court.The SCt opinions of late are a mess.Scalia: If we gave the PTO/Copyright Office the power to impose
penalties, that wouldn’t be a problem, even if it’s $100 million. As soon as
you start saying it’s private party v. private party, must go to Article
III.Breyer: If Congress thinks it’s a
good idea, and it’s not nutty, it’s fine: we can call it a public rights
dispute and Congress can allocate it to an Art. I tribunal. The other Justices
are somewhere in the middle.Pattern of
opinions: every case of attempted reallocation from Art. III to Art. I court
(bankruptcy), the answer is no.But
allocating to agency, the government has won the cases.Hard to make sense of that.Last Term, for the first time, the Justices
gave a reason, in another bankruptcy case.Claim at issue derives from regulatory scheme/resolution by those with
expertise is deemed essential to a regulatory scheme: right should be
integrally related to a regulatory objective.Forget about an Art. I court.What might pass muster is Congress expanding the powers of the Copyright
Office/PTO to create an adjunct office that makes decisions.But then must explain how this is related to
regulatory functions/requires expertise.Can also allow opt-out from Art. III, though some Justices worry about
voluntariness of such agreements.Also a
matter of Art. III protection of courts from Congress: that’s not something an
individual can waive.(Sounds very
unlike FAA jurisprudence.)Can be done
but must be careful.

7th Amendment: very similar questions; only new
thing added is law v. equity.7th
Amendment doesn’t apply to injunctive relief, but if it’s traditionally
required a court of law (over $50), then you have trouble.Logically, the Art. III jurisprudence should
apply to when a jury is required, but the more recent cases apply a very
formalistic approach.

Due process: Considerations include: risk of error of the
new procedures, coupled with likely reduction in error from adding procedural
safeguards; how significant the risk is ($50 can be a lot if you’re on
welfare).Courts rarely object to
hearings held just on the papers; discovery is never constitutionally required;
oral hearings with cross-examination are sometimes required (e.g. if
credibility will be at issue); access to counsel of your own choosing on your
own nickel is generally required.

These considerations are significant constraints on
design.Anything chosen will definitely
get to the SCt, at least eventually.

Legal regime that has no counterpart in the federal
gov’t.Closest would be PTO procedure as
described by Justice Thomas if PTO refuses to issue a patent—Thomas says, the
hell with the APA, you get a whole new proceeding in a court.You could get away with a design like that,
but then the Q is how valuable given the opportunity to go to plenary review.

Pam Samuelson: is the Copyright Office different given that
it is not Art. I but part of Congressional branch?

A: The whole Copyright Office system is probably
unconstitutional; adding powers to an office already in serious INS v. Chadha doubt would be extremely
risky.At least 4 votes to strike down
the whole thing, much less a new procedure, which is a risk of taking a new
procedure to the SCt.

Q: waiver: assume 30-day option to agree to another tribunal
and be bound.

A: 5 Justices once approved that in an arguably analogous
context.If it’s voluntary, but
underneath that label lies a whole lot of dispute about what constitutes
voluntariness (then again, the courts approve plea bargaining!).Some proposals include: if you go the court
route, then we increase costs to you—and that immediately raises the Q of
whether it’s a voluntary waiver.

Q: my penalties would only be the default cost of
litigation.

A: if that’s all, probably ok.The other Q is whether a private party can
waive the rights of Art. III courts—got 4 votes in a case a few decades
ago.Not clear how many votes today.

Q: how do local small claims courts get around the 7th
Amendment?

A: No systematic study.You don’t like the result, you can start over fresh in a court of
general jurisdiction.(This is what
happened in the case of the Honda Civic Hybrid owner who opted out of the
settlement and won her small claims judgment, which was then reversed on
appeal.)

Q: in California, only the D has a right of de novo review.

A: Not Art. III court.Any state can do that if it wants to, subject to due process
constraints.

Q: some proposals suggest it should be pro se only; a lot of
state small claims courts are that way, e.g., Maryland.

A: Must be reconciled with due process rules allowing people
to choose representatives, who may sometimes be nonlawyers.Trial de novo option for losing party is one
way to reconcile pro se rules with due process.

Note that congressional output has been lower by 1/3 in the
last 2 years than the lowest level in the past 100 years.Plus, Congress has to act to avoid going over
the budget cliff; if they do that, will they have any time left over?In the UK, the bar and all relevant interest
groups apparently came to consensus on what should be done, but not clear the
US bar can do that.

Copyright roundtable

Brauneis: what’s the target?What claims aren’t getting heard?We might not be able to design a procedure with $100 claims in
mind.Various numbers have been proposed
as maxima: from $10,000-80,000.Is there
a figure below which it really becomes difficult/impossible to litigate in current
federal court?

Sam Mosenkis, ASCAP: among his members, once it hits $10,000
for the fair market rate for what a license would be, they seem to file a
complaint.

David Nimmer, Irell & Manella: $80,000 because federal
litigation isn’t worth it for a $60,000 claim.

Michael Grecco, American Photographic Artists: agrees,
should be as useful as possible.

Brauneis: inflation plays a role.

Sandra Aistars, Copyright Alliance: didn’t take a position
on exact number, but whatever limits placed need to take into account other
parts of the structure. If discovery is limited, don’t set up a system where
claims will be substantial without adequate opportunity to examine the
evidence.

Brauneis: true, issues are intertwined, and change in one
affects answers about others.

Eugene Mopsik, Am. Soc. Media Photographers:
$10-25,000—anecdotally, vast majority of instances are $10,000 and under in
terms of licenses that members would have charged.

Grecco: if you’re at the point of infringement, what would
have been charged goes out the window. There’s got to be some
compensation—statutory damages—for having to take a case into any system, hire
a lawyer.

Mosenkis: we go for statutory damages, but most judges
aren’t going to award $30,000 for a $1200 license—they award enough to cover
the costs/fees.But we (ASCAP) can often
get 6 awards of $5000 each.

Victor Perlman (ASMP): it’s often a settlement amount: the
photog. often wants what would have been a reasonable licensing fee.

Samuelson: are we trying just to compensate small owners
outside the high-cost federal system? The idea that small claims would result
in statutory damage awards out of proportion untied to actual damages seems
worrisome.Compensation could be the
main point and the cases pretty straightforward. If someone is a willful
infringer, take them to federal court for statutory damages.Small claims = compensatory approach makes
sense; directed towards little guys.If
there is such a process, some part of the value is deterring smaller
infringements that are below the current federal court threshold.

Brauneis: screening—some issues may not be suitable for
small claims treatment, not just as a matter of financial eligibility but as a
matter of what we’re targeting.

Jay Rosenthal, Nat’l Music Publishers Assoc.: Small labels,
artists bemoan internet policing—ignored DMCA notices.At the top of the list of concern: DMCA is
broken/unusable.

Aistars: Agree.Whatever proceeding we come up with should limit discovery, and that
means avoiding complex claims that might not be appropriate—situations involving
additional claims: Lanham Act, TM, breach of contract, etc.

Mosenkis: if this is the type of proceeding that requires a
lawyer, it shouldn’t be a small claim.Black and white: litigate on paper.No one’s debating ownership, fair use, §110 exemptions, etc.

June Besek, Columbia: One reason to keep max lower is that
you wouldn’t need a lawyer—might think you don’t need a lawyer for $10,000 but
different for $80,000.One thing that
stops people from going to court is that it’s hard for most people to find an
affordable lawyer.

Grecco: Actual damages isn’t a deterrent in any way. Risk
management at large corporations just figure they can infringe enough and if
they have to pay the license, 80% still never found the infringement or did
anything about it.Compensatory damages
is not enough.

Samuelson: Not suggesting that there aren’t small scale
infringements. But if you’re going to design a system for those creators, it
would be better to know what their issues are and how a particular remedy would
work for them.

Brauneis: Contract claims paired with copyright claims.
National Writers’ Union: over 2/3 of grievances over online infringement did involve
claims in which there was a contract with the publisher but the publisher
allegedly overreached.If it turned out
that many of these small claims did involve copyright plus contract, a
procedure that didn’t take that into account might not adequately serve them.

Alicia Calzada, Nat’l Press Photog. Ass’n: For our
membership, there’s almost always a potential fair use argument, so our
membership would almost always be excluded if you can use a fair use defense to
defeat a tribunal’s jurisdiction.This
will cut out a large number of journalists.Huge 1A issue in that photojournalism doesn’t survive if it’s not
profitable.

Mosenkis: more complex cases—what would the litigation fees
be?Just from cost/benefit analysis—defenses
can become costly if there’s a need for depositions.

Richard Pierce: much better chance of convincing SCt that
infringement is integrated with the function of the Copyright Office than
contract cases—3 different bankruptcy cases have said “that’s what courts do;
doesn’t require special expertise.”

Nimmer: In the UK, contract disputes are included within the
subject matter of the IP, but in the US it’s more complicated.Plaintiff can elect to say you violated the
contract and therefore it’s infringement, or can say it’s breach of contract
and get exclusive state court jurisdiction. It all depends on the
contract.Typically contracts are
drafted by publisher so author elects federal jurisdiction/copyright.Congress could pass a law changing
jurisdiction allowing copyright claims in state court when the amount in
controversy is under $20,000 or when the infringement arises out of a breach of
contract.Same with current Lanham
Act.Could avoid constitutional
problems.Many SCt cases in which there’s
a problem with 11th Amendment suing states for IP violations in
federal court—Congress can solve that with state jurisdiction at the same time.

Jay Rosenthal: compulsory licensing under §115, if there’s a
violation of the license, one could pull the license and then have an action
against the party.That would be a
useful remedy for our members.Until
recently, not many people took the compulsory license, but that’s
changing.Most online services are going
to file NOIs and go for compulsory license. Would be helpful to allow small
claims against these services before they go out of business.

Victor Perlman: as soon as the system involves lawyers, you’ve
defeated the purpose. As soon as you have discovery, you run into soft costs
that haven’t entered into the discussion—time, effort and emotional angst for
individual creators is just horrific, especially for sole proprietors who have
to choose between litigating and getting business.

Me: The problem here is that we have some potentially large
defendants and some potentially small ones, and without thinking about that we
won’t have a great handle on remedies/procedures.The problem of the big company that doesn’t
bother to license is different than the problem of the small defendant.Why not think about a dual-track system based
on defendant and plaintiff size?

Kim Tommaselli, Independent Film Alliance: small to medium
sized companies, and majority of our members have films where the license fees
could be $10,000 or more, so the cap should be more.Huge gap between $10,000 and what federal
litigation costs.Arbitration/lawyer
representation: can allow discovery or lawyer representation based on the
complexity of the case.Ability to bring
all claims against one defendant would be very useful.

Brauneis: parties may have very different views about
whether the contract allows certain uses.

Aistars: Yes, consider your potential defendant!Also with respect to the contracts issue.If it’s not photographer-publisher, with
bargaining power issues, contract could also agree to arbitration.(Of course arbitration can be highly biased
against the little guy, as we’ve seen.)Other area of complexity: copyright ownership disputes.May not be appropriate in alternative dispute
resolution.

Brauneis: Procedure workable without a lawyer: one model.
Must be constrained to very simple claims and very low monetary amounts for
that to work. Then there’s a second model: stuff that doesn’t work federally
because of the costs.That’s a different
approach, with a higher maximum amount in controversy and more allowable
defenses.

Grecco: constitutional issues precluded us from proposing a
real small claims without a lawyer. We want to do something within existing
rules. Rocket dockets/expedited trials.Can we create something else that can survive the SCt/that can get
passed?

Maria Pallante, Register of Copyrights: Small press v.
author: they may not know what the contract means—ran into this with Google
Books. We like to say that’s just about old books, but contracts will always be
unclear.Something the Office may
explore.

Rosenthal: one owner v. another.In general, comments from publishers &
songwriters—they are scared of a small claims court working out song
splits.(A real Judge Judy
situation.)But these folks do need
cheaper ways to figure this out—maybe a cheaper mediation process.(The Screenwriters’ Guild
model, as explained by Catherine Fisk?Lots of arbitrations, lots of dissatisfaction, but generally seems
better than the alternatives?)

Paul Storer: Flagrant, willful, repeated infringement: judge
can award additional damages.Maybe when
you have a license for 10 computers, but installed it on 20.Particularly software rightholders seek
additional damages.Larger enterprises:
there is a right of publication for successful claimants—there is a
reputational hit for the larger enterprise if they’ve repeatedly and
consistently taken works to which they had no right.

Grecco: here it’s corporate policy. Risk management: how
much can we take?

Storer: begs the question whether anything will be a
deterrent.

Alicia Calzada: if there’s a nonlawyer procedure, what
happens when the defendant shows up with a lawyer?

Mosenkis: should be possible to proceed pro se.

Perlman: wish list.Corporation could have a representative—that might be someone who’s
admitted to the bar. But in a People’s Court system, the judge has a fair
amount of discretion to control the flow of dialogue so there’s some
equalization.

Aistars: might not advocate for a no-lawyer rule, but
account for straightforward cases that can be dealt with in paper filings. Look
at the UDRP model: when you can essentially fill out a form.

Brauneis: target is a proceeding in which a nonlawyer could
be comfortable bringing a claim.

Grecco: some artists might want a lawyer, even in front of a
magistrate/arbitrator/mediator.Ban on
lawyers is not a good option.

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